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2005 (7) TMI 287 - AT - Income TaxBusiness expenditure - Purchase of rights and titles of the two journals - Penalty levied u/s 271(1)(c) - Concealment Or furnishing of inaccurate particulars of income - bona fide claim or Not - Whether the declaration made by the assessee as a footnote in the computation sheet was complete, accurate and bona fide - HELD THAT:- From the facts, it is clear that assessee purchased: (i) a running business, (ii) right to publish two titles, (iii) on complete and exclusive ownership basis along with all the rights and benefits attached thereto. As an ancillary to the purchase of titles and running business, the assessee also got detailed list of subscribers, advertisers and employees, who want to continue with the assessee after takeover and also space on rent, Thus in addition to title, the assessee also purchased something akin to goodwill. Same customers and advertisers will remain attached to the titles. All the tests lead to one inescapable conclusion that what the assessee had spent was for acquiring a new business/new assets an enduring benefit and a source of income. From all the tests, the expenditure incurred could not have been considered u/s 37(1) for which claim was made. One of the essential conditions for allow ability of the claim u/s 37(1) is that expenditure should not be of the nature of capital expenditure. Hence, the claim of the assessee for Rs. 2.15 crores made in the return was not at all admissible as it was clearly a capital expenditure incurred for acquiring a new business, an advantage of enduring benefit, a source of income and acquisition of disposable rights in the title. The assessee declared only half truth that it is purchasing "publishing rights of journal, right to customers and subscribers, use of trademark." The other half as shown above viz.,-(1) to whom payment was made and when, (2) copies of agreements/MoU, (3) that assessee is purchasing a new business, (4) that it is purchasing ownership of the titles along with incidental paraphernalia were kept withheld, (5) the period for which such rights were purchased. The claim was against the explicit opinion of the auditors according to which only 1/3rd could be claimed this year. Hence, the assessee was apparently conscious of the wrong claim. If the claim would have been restricted to one third as per auditor's advice, there could be some semblance of bona fide even though the opinion of the auditors is not according to law as entire expenditure is prima facie disallowable. AO has allowed 1/14th of expenditure u/s 35A hence there was an element of allowability and hence bona fide of the assessee. We are of the view that if ITO has in his wisdom covered the case u/s 35A treating the claim as that of copyright, it does not change the nature of expenditure which is basically capital. Only for this reason claim does not become bona fide. For a deduction to be bona fide made, it should be supported by the express provisions of law or by accounting standards or by decisions of High Court/Hon'ble Supreme Court, if facts matrix is similar. If the claim is made by stating half truth thereon and not disclosing relevant and material facts, the disclosure would not be bona fide. There are two aspects of guilt. One is 'mens rea' and other is 'actus rea'. In the former, the mental element of guilt is involved and in the other, there is an act of commission or omission leading to breach of duty with or without guilty mind. When one has to prove an offence for the purposes of prosecution, a mental element of guilt has to be established. This is necessary when there is an offence against the State. But when there is a disregard to statutory provision, or there is an avoidance of civil liability, it is enough if AO is able to establish that the facts which were required to be disclosed fully and truly for determination of tax liability has been disclosed either in part or are not accurate in the sense that if remaining part of the facts i.e., accurate and full facts are brought on record then the decision arrived at by the assessee about a claim or about taxability of an item would go against the assessee. In the present case, the assessee disclosed those parts of the total facts, which would justify its claim and bring some semblance with Alembic Chemical Works Co. Ltd.'s case. It clearly showed 'actus rea', if not a complete 'mens rea'. If the case of the assessee does not fit completely in the first part i.e., 'concealed particulars of income' which embraces within its scope some element of 'mens rea' as the word 'concealed' has been used in that part in cl. (c) of s. 271(1) his case would certainly fall within the domain of 'actus rea' as he has filed 'inaccurate and incomplete particulars'. Thus, we hold that the assessee has filed inaccurate particulars for claiming the deduction and explanation furnished was not bona fide. We therefore, uphold the levy of penalty and reverse the order of CIT(A). In the result, the appeal of the Revenue is allowed.
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